A report from market research firm iSuppli says that demand for solar panels spiked in Germany in 2009, helping to mitigate the oversupply problems that are plaguing the solar industry.

Supply will exceed demand by 65.9 percent in 2009, rather than the previously forecasted 91.9 percent rate.

Germany's solar capacity increased a full gigawatt above iSuppli's earlier projections. The country was expected to install 1.53 gigawatts this year; due to higher installation activity, that figure has risen to 2.5 gigawatts. Installers in Germany were motivated by declines in solar panel prices, iSuppli suggests.

Global demand fell sharply in 2009, at the same time that photovoltaic manufacturers were ramping up production. PV equipment prices fell 20 percent between January and July as a result.

The forecast for 2010 will depend on multiple factors. Solar panel companies are dialing back production in late 2009. And German demand will remain high if PV prices fall another 10 percent.

"Supply and demand dynamics in the fourth quarter will set the tone on whether the oversupply situation continues in 2010," iSuppli director of PV research Dr. Henning Wicht says.